Real estate investors, whether active or passive, should take note of Biden’s infrastructure plan and what areas will be impacted most. One of the key defining evaluation points when looking at property value is its location, and a property’s proximity or accessibility to surrounding infrastructure impacts the desirability of residents or tenants to be there.
The infrastructure bill is the largest government investment seen in this sector for quite some time; and while the results may not be realized for a few years, investors can begin to pinpoint areas that will trend based on these capital investments. These investments impact both residential real estate as well as commercial. In fact, infrastructure spending on utilities, transportation, and telecommunications is the most important factor when it comes to influencing commercial real estate and development decisions, according to Paulina Likos of U.S News.
For commercial projects, investors and developers should look out for ‘Signal Projects’, a term coined by Jeff Bartel (chairman and managing director at Hamptons Group in Miami) and their ripple effect on the surrounding communities suggesting future growth and demand of all asset classes. The capital improvements that will directly impact commercial and industrial property values are the construction of better roads, bridges, airports, and railroads across the United States. Improving transportation to and from commercial and industrial properties improves the demand among businesses who want to be easily accessible to their customers and employees. From an industrial asset perspective, businesses will seek property or land that makes receiving and sending shipments via various modes of transportation easier to avoid additional costs. Any spending increase in commercial real estate will also impact the housing market, specifically home and rent prices. With the development of new commercial sites and increased tenant move-ins, the rise in job count and demand for personnel will be impacted, ultimately creating opportunity for new multifamily investment and development. The more desirable a neighborhood is to live based on proximity to employment options, recreational areas, and improved transportation infrastructure, the more potential residents will be willing to pay a premium to live there.
An additional housing market impact that will be realized by Biden’s infrastructure plan is affordable housing. $213 billion is proposed to be allocated for building, renovating and retrofitting 2 million homes and housing units, with the upgrades being paid for with grant programs. In addition, the passing of the Neighborhood Homes Investment Act (NHIA) would offer $20 billion in tax credits to developers and investors to build or renovate approximately 500,000 owner-occupied homes.
Will investors benefit from paying attention to where infrastructure improvements are being planned?
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